SMTC Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Segmented Information

Note 9 - Segmented Information

9 Months Ended

Oct. 01, 2017

Segment Reporting Disclosure [Text Block]

9 .	Segmented information

General description

The Company is operated and managed geographically and has production facilities in the United States, Mexico and China. The Company utilizes reportable segment

’s site contribution (site revenues minus operating expenses, excluding unrealized foreign exchange gain (loss) on unsettled forward exchange contracts, corporate allocations and restructuring expenses) to monitor reportable segment performance. Site contribution is utilized by the chief operating decision-maker as the indicator of reportable segment performance, as it reflects costs which our operating site management is directly responsible for. Intersegment adjustments reflect intersegment sales that are generally recorded at prices that approximate arm’s-length transactions. In assessing the performance of the reportable segments, management attributes site revenue to the reportable segment that ships the product to the customer, irrespective of the product’s destination. Information about the reportable segments is as follows:

	Three months ended						Nine months ended
	October 1 , 201 7			October 2, 2016			October 1 , 201 7			October 2, 2016
Revenues
Mexico	$	23,907		$	24,857		$	70,394		$	77,321
China		6,934			15,134			23,031			41,891
U.S.		6,319			5,009			15,229			15,689
Total	$	37,160		$	45,000		$	108,654		$	134,901

Intersegment revenue
Mexico	$	—		$	(141	)	$	(12	)	$	(396	)
China		(2,640	)		(2,108	)		(7,810	)		(5,952	)
U.S.		(103	)		(68	)		(242	)		(335	)
Total	$	(2,743	)	$	(2,317	)	$	(8,064	)	$	(6,683	)

Net external revenue
Mexico	$	23,907		$	24,716		$	70,382		$	76,925
China		4,294			13,026			15,221			35,939
U.S.		6,216			4,941			14,987			15,354
Total segment revenue (which also equals consolidated revenue)	$	34,417		$	42,683		$	100,590		$	128,218

Site Contribution
Mexico	$	2,346		$	1,642		$	5,031		$	6,513
China		146			1,643			(1,028	)		2,808
U.S.		(55	)		(331	)		(2,169	)		(771	)
Total	$	2,437		$	2,954		$	1,834		$	8,550

Corporate allocations		2,237			2,789			7,686			8,323
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		118			4			(1,438	)		(995	)
Interest		229			164			625			598
Restructuring charges		326			—			1,677			176
Earnings (loss) before income taxes	$	(473	)	$	(3	)	$	(6,716	)	$	448

Additions to property, plant and equipment

The following table contains additions to property, plant and equipment including those acquired through capital leases for the

three

and

nine

months ended

October 1, 2017

and

October 2, 2016:

	Three months ended				Nine months ended
	October 1 , 201 7		October 2, 2016		October 1 , 201 7		October 2, 2016
Mexico	$	220	$	256	$	400	$	590
China		59		95		134		575
U.S.		171		12		480		303
Segment total		450		363		1,014		1,468
Corporate and other		—		14		124		185
Total	$	450	$	377	$	1,138	$	1,653

Property, plant and equipment

(a)

	October 1 , 201 7		January 1 , 201 7
Mexico	$	7,988	$	8,858
China		1,510		3,046
U.S.		1,254		2,314
Corporate and other		210		219
Segment assets	$	10,962	$	14,437

(a)

Property, plant and equipment information is based on the principal location of the asset.

Geographic revenues

The following table contains geographic revenues based on the product shipment destination, for the

three

and

nine

months ended

October 1, 2017

and

October 2, 2016:

	Three months ended				Nine months ended
	October 1 , 201 7		October 2, 2016		October 1 , 201 7		October 2, 2016
U.S.	$	27,044	$	29,470	$	77,219	$	83,848
Canada		4,390		9,132		14,894		32,832
Europe		—		592		—		1,497
China		1,488		1,751		3,844		4,403
Africa		1,495		1,738		4,633		5,638
Total	$	34,417	$	42,683	$	100,590	$	128,218

Significant customers and concentration of credit risk:

Sales of the Company

’s products are concentrated in certain cases among specific customers in the same industry. The Company is subject to concentrations of credit risk in trade receivables. The Company considers concentrations of credit risk in establishing the allowance for doubtful accounts and believes the recorded allowances are adequate. The increase in the allowance for doubtful accounts from

January 1, 2017

October 1, 2017

predominantly related to

one

customer for which management has concluded a provision was required for the outstanding accounts receivable due to the deterioration of the credit risk associated with

one

customer.

The Company expects to continue to depend upon a relatively small number of customers for a significant percentage of its revenue. In addition to having a limited number of customers, the Company manufactures a limited number of products for each customer. If the Company loses any of its larger customers or any product line manufactured for

one

of its larger customers, it could experience a significant reduction in revenue. Also, the insolvency of

one

or more of its larger customers or the inability of

one

or more of its larger customers to pay for its orders could decrease revenue. As many costs and operating expenses are relatively fixed, a reduction in net revenue can decrease profit margins and adversely affect the business, financial condition and results of operations.

During the

three

months ended

October 1, 2017,

two

customers exceeded

10%

of total revenues representing

14.0%

and

12.8%

respectively (

October 2, 2016 –

two

customers represented

15.6%

and

10.2%,

respectively) of total revenue for the

three

months ended

October 1, 2017.

During the

nine

months ended

October 1, 2017,

two

customers individually comprised

12.3%

and

11.5%

(

October 2, 2016 –

two

customers individually comprised

15.8%

and

15.4%

) of total revenue.

As of

October 1, 2017,

one

customer exceeded

10%

of the Company’s accounts receivable representing

15.3%

of total accounts receivable, (

January 1, 2017,

one

customer represented

11.8%

of the Company’s accounts receivable).